State Worries Arthur Andersen May Not Fulfill Contract

(Host) The state of Vermont has a multi-million dollar contract with the controversial Arthur Andersen accounting and consulting firm. Vermont used Andersen computer consultants for an expensive computer upgrade.

The system still is not working right, and state officials are now worried that Andersen's recent troubles related to the Enron scandal may affect its ability to complete its Vermont contracts.

VPR's John Dillon has more.

(Dillon) Arthur Andersen is the main state consultant for a new $20 million computerized accounting system.

Andersen is now in financial trouble as dozens of major clients leave as a result of criminal charges related to its audits of the Enron Corporation.

In Vermont, the state paid Andersen $6 million in 2001, and $3.4 million last year. The state still owes the company several hundred thousand dollar for work that's not yet finished.

Finance and Management Commissioner Sean Campbell says he's asked his lawyers to review the state's options if the company goes out of business. Campbell says Andersen is close to completing its work for the state:

(Campbell) "Once we accept ... the final acceptance of the system, then we have a one-year warranty. Obviously that would be of some concern to us, if Andersen were to go under, how we would get any warranty? We've actually talked to our counsel about that and frankly they're not encouraging. We'd have to get in line with every other creditor."

(Dillon) The state hired Andersen to work on a new software system, called VISION. The system is supposed to accurately track the money coming in and going out of state government. The system was plagued with start-up problems and is still not working properly, according to a recent report by state auditor of accounts Elizabeth Ready.

The report says Andersen and the software designer blamed each other for the Vermont problems. Ready says when the system works as promised, it will be a tremendous improvement for state government:

(Ready) "But clearly the company has not delivered at this point upon all of the deliverables that were outlined in the contract. And I have warned the Department of Finance and Management that in fact we need to be working aggressively with them.... We need to really put the pressure on Arthur Andersen to assure that they deliver."

(Dillon) Ready says that state offices that use the VISION system face problems producing accurate and timely financial reports. She says Andersen has also failed to develop an operations manual to help the state treasurer's office with its bookkeeping:

(Ready) "None of these are fatal flaws. They can all be worked through. The question simply is, will the state of Vermont be able to get Arthur Andersen to deliver what we've paid for?"

(Dillon) Ready has recommended the state hold back its final payment under the Andersen contract until the work is finished.